Question #1: If a non-binding price ceiling is put in place, what is the typical consequence on the market?
A) The legal market quantity and price do not change, the market operates at equilibrium
B) There will be an increase in quantity sold in the market
C) Consumers will be unable to receive the desired quantity of goods in the market
D) Producers will be stopped from receiving their goods at the equilibrium price
Use the following information for Questions 2 - 4:
- Qs = 10 + 6P
- Qd = 34 - 2P
Question #2: What are the equilibrium price and quantity?
A) $4 and 30
B) $3.50 and 25
C) $3 and 28
D) $5 and 40
Question #3: The Isle of Crammer Nation has decided to impose a price ceiling of $2. Is there now a shortage or surplus of goods and by how much?
A) Shortage of 6 units
B) Surplus of 8 units
C) Surplus of 5 units
D) Shortage of 8 units